{"id":11473,"date":"2017-02-01T06:21:01","date_gmt":"2017-02-01T06:21:01","guid":{"rendered":"http:\/\/revoscience.com\/en\/?p=11473"},"modified":"2017-02-01T06:31:11","modified_gmt":"2017-02-01T06:31:11","slug":"fair-price-pay","status":"publish","type":"post","link":"https:\/\/www.revoscience.com\/en\/fair-price-pay\/","title":{"rendered":"A fair price to pay?"},"content":{"rendered":"

Study shows online retail prices often match store prices \u2014 and suggests why they sometimes do not.<\/strong><\/em><\/span><\/p>\n

\"\"
An innovative study by an MIT economist found that in 10 major countries, companies sell their wares at the same prices in stores and online, at the same moments, nearly three-quarters of the time.<\/figcaption><\/figure>\n

CAMBRIDGE, Mass. —\u00a0When you buy products online, do you imagine you could get better prices in a store? Conversely, does in-store shopping lead you to wonder whether you are missing better prices online?<\/span><\/p>\n

Fear not.<\/span><\/p>\n

An innovative study by an MIT economist shows that in 10 major countries, companies sell their wares at the same prices in stores and online, at the same moments, nearly three-quarters of the time.\u00a0<\/span><\/p>\n

\u201cWe were a bit surprised by the numbers,\u201d says Alberto Cavallo, the Douglas Drane Professor in Information Technology and Management at the MIT Sloan School of Management and author of a newly published paper on the subject. In his view, the level prices have a lot to do with companies wanting to seem \u201cfair\u201d to as many consumers as possible.<\/span><\/p>\n

\u201cIt has a lot to do with experience,\u201d Cavallo adds. \u201cI think what is driving much of this is consumers don\u2019t think it\u2019s fair when they see a different price online.\u201d<\/span><\/p>\n

Online shopping accounted for fewer than 10 percent of all retail transactions in the U.S. as of 2014, and researchers are still examining many of the shifting contours of online retail.\u00a0<\/span><\/p>\n

Cavallo\u2019s study also contains other revealing data about the dynamics of online prices, including an explanation for some of the discrepancies in offline and online prices that exist among retail sectors.<\/span><\/p>\n

Where in-store prices tend to diverge from online prices, it is often in business sectors with a premium on immediate convenience, including drug stores. If you need an item within an hour or two \u2014 some aspirin or band-aids, for instance \u2014 you are more likely to pay more in person.<\/span><\/p>\n

On the other hand, retailers in electronics or apparel, whose products are often associated with less urgency, tended to have in-store and online prices that matched more closely.\u00a0<\/span><\/p>\n

The paper, \u201cAre Offline and Online Prices Similar? Evidence from Large Multi-Channel Retailers<\/a><\/span>,\u201d appears in the January issue of the American Economic Review<\/em>.\u00a0<\/span><\/p>\n

The cost of convenience<\/strong><\/span><\/p>\n

Cavallo\u2019s paper grew out of MIT\u2019s Billion Prices Project, an ongoing effort to track online prices, founded in 2008. To conduct the study, Cavallo recruited 323 workers to scan prices from stores in 10 countries, and compared these prices to the online data available for the same products, at the same time, from the same retailers.<\/span><\/p>\n

All told, the study examined about 38,000 prices for roughly 24,000 products in those 10 countries, from December 2014 through March 2016. On aggregate, prices were the same 72 percent of the time.<\/span><\/p>\n

In the U.S., products had the same prices about 69 percent of the time; that figure was as low as 42 percent in Brazil and as high as 91 percent in Britain.\u00a0<\/span><\/p>\n

Those numbers help bring clarity to a matter where subjective impressions can vary widely \u2014 although with good reason, perhaps.<\/span><\/p>\n

\u201cIf you ask someone are the prices you get online the same as what you get in the store, they have different views, depending on where they shop or live,\u201d Cavallo says.<\/span><\/p>\n

The study shows that apparel prices are the same, online and in stores, about 92 percent of the time; for electronics, that figure is 83 percent. But for drugstores, prices are identical just 38 percent of the time.<\/span><\/p>\n

Cavallo thinks the differences among sectors \u201cmake intuitive sense. In electronics and apparel, the online and offline markets are very integrated and people are used to doing some research online even if they\u2019re going to buy offline.\u201d<\/span><\/p>\n

By contrast, he says, \u201cNow you go to a drugstore. There we found that in-store prices are higher. It makes sense. When you go to CVS or Walgreens, you need the product immediately, and you are willing to pay for that convenience.\u201d<\/span><\/p>\n

Office supply stores had an even lower convergence of prices, which were identical just 25 percent of the time, although a ready explanation for that is not at hand. As Cavallo notes in the paper, office-supply prices \u201care sometimes higher and sometimes lower online, without any clear patterns.\u201d<\/span><\/p>\n

Winners and losers<\/strong><\/span><\/p>\n

Economists who have read the paper say it is a valuable addition to the literature about online prices.<\/span><\/p>\n

For his part, Cavallo recognizes that there is considerable room for more research about online prices and suggests it would be valuable to conduct this kind of study at different points in time, to see if there are shifting trends in this area.<\/span><\/p>\n

As he also notes, the study shows that prices tend to flatten out across U.S. regions, probably due to the transparency of online prices. Whether that means prices tend to rise in unison or settle at lower levels is an important one to study in further detail, Cavallo observes, since it affects the cost of living and purchasing power from place to place.<\/span><\/p>\n

\u201cThat has implications for economies and how it affects welfare,\u201d Cavallo says. \u201cSome people will win, some people will lose. \u2026 Hopefully we can continue doing this and see how things change over time.\u201d<\/span><\/p>\n","protected":false},"excerpt":{"rendered":"

Study shows online retail prices often match store prices \u2014 and suggests why they sometimes do not. CAMBRIDGE, Mass. —\u00a0When you buy products online, do you imagine you could get better prices in a store? Conversely, does in-store shopping lead you to wonder whether you are missing better prices online? Fear not. An innovative study […]<\/p>\n","protected":false},"author":6,"featured_media":11474,"comment_status":"open","ping_status":"open","sticky":false,"template":"","format":"standard","meta":{"footnotes":""},"categories":[34,22],"tags":[],"class_list":["post-11473","post","type-post","status-publish","format-standard","has-post-thumbnail","hentry","category-economics","category-other"],"featured_image_urls":{"full":["https:\/\/www.revoscience.com\/en\/wp-content\/uploads\/2017\/02\/MIT-Online-Prices-1_0.jpg",639,426,false],"thumbnail":["https:\/\/www.revoscience.com\/en\/wp-content\/uploads\/2017\/02\/MIT-Online-Prices-1_0-150x150.jpg",150,150,true],"medium":["https:\/\/www.revoscience.com\/en\/wp-content\/uploads\/2017\/02\/MIT-Online-Prices-1_0-300x200.jpg",300,200,true],"medium_large":["https:\/\/www.revoscience.com\/en\/wp-content\/uploads\/2017\/02\/MIT-Online-Prices-1_0.jpg",639,426,false],"large":["https:\/\/www.revoscience.com\/en\/wp-content\/uploads\/2017\/02\/MIT-Online-Prices-1_0.jpg",639,426,false],"1536x1536":["https:\/\/www.revoscience.com\/en\/wp-content\/uploads\/2017\/02\/MIT-Online-Prices-1_0.jpg",639,426,false],"2048x2048":["https:\/\/www.revoscience.com\/en\/wp-content\/uploads\/2017\/02\/MIT-Online-Prices-1_0.jpg",639,426,false],"ultp_layout_landscape_large":["https:\/\/www.revoscience.com\/en\/wp-content\/uploads\/2017\/02\/MIT-Online-Prices-1_0.jpg",639,426,false],"ultp_layout_landscape":["https:\/\/www.revoscience.com\/en\/wp-content\/uploads\/2017\/02\/MIT-Online-Prices-1_0.jpg",639,426,false],"ultp_layout_portrait":["https:\/\/www.revoscience.com\/en\/wp-content\/uploads\/2017\/02\/MIT-Online-Prices-1_0.jpg",600,400,false],"ultp_layout_square":["https:\/\/www.revoscience.com\/en\/wp-content\/uploads\/2017\/02\/MIT-Online-Prices-1_0.jpg",600,400,false],"newspaper-x-single-post":["https:\/\/www.revoscience.com\/en\/wp-content\/uploads\/2017\/02\/MIT-Online-Prices-1_0.jpg",639,426,false],"newspaper-x-recent-post-big":["https:\/\/www.revoscience.com\/en\/wp-content\/uploads\/2017\/02\/MIT-Online-Prices-1_0.jpg",540,360,false],"newspaper-x-recent-post-list-image":["https:\/\/www.revoscience.com\/en\/wp-content\/uploads\/2017\/02\/MIT-Online-Prices-1_0.jpg",95,63,false],"web-stories-poster-portrait":["https:\/\/www.revoscience.com\/en\/wp-content\/uploads\/2017\/02\/MIT-Online-Prices-1_0.jpg",639,426,false],"web-stories-publisher-logo":["https:\/\/www.revoscience.com\/en\/wp-content\/uploads\/2017\/02\/MIT-Online-Prices-1_0.jpg",96,64,false],"web-stories-thumbnail":["https:\/\/www.revoscience.com\/en\/wp-content\/uploads\/2017\/02\/MIT-Online-Prices-1_0.jpg",150,100,false]},"author_info":{"info":["Amrita Tuladhar"]},"category_info":"Economics<\/a> Other<\/a>","tag_info":"Other","comment_count":"0","_links":{"self":[{"href":"https:\/\/www.revoscience.com\/en\/wp-json\/wp\/v2\/posts\/11473","targetHints":{"allow":["GET"]}}],"collection":[{"href":"https:\/\/www.revoscience.com\/en\/wp-json\/wp\/v2\/posts"}],"about":[{"href":"https:\/\/www.revoscience.com\/en\/wp-json\/wp\/v2\/types\/post"}],"author":[{"embeddable":true,"href":"https:\/\/www.revoscience.com\/en\/wp-json\/wp\/v2\/users\/6"}],"replies":[{"embeddable":true,"href":"https:\/\/www.revoscience.com\/en\/wp-json\/wp\/v2\/comments?post=11473"}],"version-history":[{"count":0,"href":"https:\/\/www.revoscience.com\/en\/wp-json\/wp\/v2\/posts\/11473\/revisions"}],"wp:featuredmedia":[{"embeddable":true,"href":"https:\/\/www.revoscience.com\/en\/wp-json\/wp\/v2\/media\/11474"}],"wp:attachment":[{"href":"https:\/\/www.revoscience.com\/en\/wp-json\/wp\/v2\/media?parent=11473"}],"wp:term":[{"taxonomy":"category","embeddable":true,"href":"https:\/\/www.revoscience.com\/en\/wp-json\/wp\/v2\/categories?post=11473"},{"taxonomy":"post_tag","embeddable":true,"href":"https:\/\/www.revoscience.com\/en\/wp-json\/wp\/v2\/tags?post=11473"}],"curies":[{"name":"wp","href":"https:\/\/api.w.org\/{rel}","templated":true}]}}